RAK Petroleum, a privately owned oil and gas company in Ras al Khaimah, plans to redevelop the emirate's idle Saleh gasfield after boosting its stake in the project.
RAK Petroleum signed an agreement yesterday to take over the 60 per cent interest in Saleh held by the state-owned utility Ras Al Khaimah Gas Commission, also known as RAK Gas, in exchange for 100 million shares in the RAK Education Company.
The deal will make RAK Petroleum the sole holder of the offshore gas concession, marking a big vote of confidence by Ras al Khaimah's Government in the private sector. The emirate badly needs gas from Saleh because it is suffering electricity shortages caused by a lack of fuel for its power plants. "We are pleased to have RAK Petroleum strengthen its commitment to development of the offshore oil and gas sector of Ras al Khaimah," said Sheikh Saud bin Saqr, Crown Prince and Deputy Ruler of Ras al Khaimah. RAK Gas has a "back-in" right to reacquire 30 per cent of the Saleh project by paying 30 per cent of the cost of drilling the first well, but if RAK Gas exercises that option, RAK Petroleum will still be in control.
Bijan Mossavar-Rahmani, the chairman and chief executive of RAK Petroleum, said: "Advances in technology as well as in oil and gas prices have regenerated our interest in the remaining potential of this field." The Saleh field in the Strait of Hormuz was discovered by the US-based Union Oil in 1964 but oil production did not start until 20 years later. Output from the field peaked in 1986 at about 70 million cubic feet per day of gas and 13,000 barrels per day of condensate. Production later declined to a trickle as reservoir pressure fell and water encroached into the deposit.
RAK Petroleum acquired a 40 per cent stake in Saleh in 2007 when it took over Indago Petroleum, the previous holder of the concession. RAK Petroleum said yesterday it would begin the redevelopment in the first half of next year by deepening an existing well at the field. Mr Mossavar-Rahmani was formerly the chief executive of Apache, a large oil and gas producer he founded in the US. He said yesterday the asset swap with RAK Gas would expand RAK's presence in a region where it had "considerable experience and heritage" and would refocus the company on its core business of oil and gas development.
In the two years since Mr Mossavar-Rahmani took charge of the company owned by a group of UAE and Saudi businessmen, RAK Petroleum has steadily expanded its footprint in the MENA region. It has operations in Tunisia and Oman as well as in its home emirate and neighbouring Sharjah, and an indirect interest in Iraqi Kurdistan through a 30 per cent shareholding in the Norwegian oil and gas company DNO International.
* This story was updated on October 6 2010 to correct the number of shares in the RAK Education Company involved in the deal between RAK Petroleum and RAK Gas and to clarify RAK Petroleum's status with regards to oil assets in Iraqi Kurdistan.
